How did markets react to the US-Iran peace framework?

European, UK and Japanese equities rose sharply after the US and Iran agreed a framework deal to end the war. European stocks climbed to record highs while the FTSE 100 reached a two-month high. Falling oil prices eased inflation and interest rate concerns. Government bonds rallied as investors scaled back expectations for further rate rises. The peace remains fragile, however, with both sides launching further attacks before agreeing a ceasefire.

What happened with the SpaceX IPO?

SpaceX made the biggest market debut in history. Shares soared 19% on the first day and climbed a further 20% on the second, briefly rising above US$200 from an IPO price of US$135. The shares then retraced sharply, wiping more than US$600bn from the company's market value. Despite the volatility, the stock finished the month up 27%, underlining continued enthusiasm for AI and technology investment.

What does Andy Burnham becoming Prime Minister mean for markets?

Keir Starmer announced his resignation, paving the way for Andy Burnham to take over at No.10. UK equities were largely unfazed, while the pound and government borrowing costs steadied. Markets took the political transition in their stride. The Bank of England left rates unchanged at 3.75% and lowered its inflation forecast, expecting inflation to rise to just over 3.25% later this year.

How are BSG's investment portfolios positioned in July 2026?

Portfolios remain cautiously positioned, underweight US large caps due to concerns over stretched valuations and excessive market concentration, and overweight fixed income for its attractive yields and more favourable risk-return profile. During June, overweight positions in US small caps and US healthcare added value as technology-concentrated large caps came under pressure.

What is market concentration and why does it matter?

Market concentration is when a small number of companies make up a large share of an index's value. In 2026 this has been driven by a handful of US mega-cap technology stocks, sometimes called the Magnificent 7. It matters because when an index is concentrated, its performance depends heavily on those few companies. In June, the Nasdaq fell as much as 7% from its record high as those stocks came under pressure, illustrating how concentration can increase risk for investors holding index-tracking funds.

What does a rotation from growth to value stocks mean?

A rotation from growth to value describes investors moving money out of fast-growing companies, typically technology, and into value stocks such as industrials, healthcare and financials that trade at lower valuations. This happened in June 2026, with the Dow Jones Industrial Average outperforming the technology-heavy Nasdaq and S&P 500. Rotations like this reflect changing investor sentiment about where returns and risks lie across different parts of the market.

Why did government bonds rally in June 2026?

Government bonds rallied as investors scaled back expectations for further interest rate rises. The US-Iran peace framework and falling oil prices eased fears that inflation would remain high, which reduced the likelihood of aggressive rate increases. When investors expect fewer rate rises, existing bonds with fixed yields become more attractive, pushing their prices up. This signalled growing confidence that a prolonged period of higher inflation may be avoided.

What did the Bank of England decide in June 2026 and what is the outlook?

The Bank of England left interest rates unchanged at 3.75% after UK inflation held at 2.8% in May. Despite earlier concerns that the Iran war would push inflation higher, the Bank lowered its inflation forecast, expecting inflation to rise to just over 3.25% later this year. Consumer spending rebounded in May and there are signs confidence is improving, although pressures remain. UK unemployment edged down to 4.9% in the three months to April.

July 2026 Market Update - Europe and Japan lead market gains

Q: Why did the European Central Bank raise interest rates in 2026?

The European Central Bank raised interest rates for the first time since 2023, increasing its main deposit rate from 2% to 2.25% in response to higher inflation. Eurozone inflation rose to 3.2% in May from 3% the previous month, raising concerns that manufacturers may need to pass higher costs on to consumers. Markets expect two further rate increases by next spring. The eurozone economy unexpectedly contracted by 0.2% in the first quarter.

Stefan Lubek
Jul 2
4 min read

Relief over a US–Iran peace framework agreement lifted European, UK and Japanese equities, while falling oil prices eased concerns about inflation and interest rates.

Investor confidence returns.

European, UK and Japanese equities rose sharply after the US and Iran agreed a framework deal to end the war. European stocks climbed to record highs, while the

FTSE 100 reached a two-month high as investors welcomed the breakthrough. US markets were more mixed, with investors rotating away from technology stocks into small caps, industrials, healthcare and financials. This helped the broader Dow Jones Industrial Average outperform the technology-heavy Nasdaq and S&P 500 indices.

The Nasdaq index fell by as much as 7% from its record high before recovering much of the decline as investors refocused on the beneficiaries of AI investment. Government bonds also rallied as investors scaled back expectations for further interest rate rises,

signalling growing confidence that a prolonged period of higher inflation may be avoided.

The biggest market debut in history also captured investors’ attention. SpaceX shares finished the month up 27% despite sharp early volatility, underlining continued enthusiasm for AI and technology related investment opportunities.

The US Federal Reserve (Fed) held interest rates at 3.50% to 3.75% for a fourth consecutive meeting but signalled a possible rate hike later this year. US inflation rose to a three-year high of 4.2% in May, while the labour market remained resilient, with employers adding 172,000 jobs and unemployment holding steady at 4.3%.

Political uncertainty fails to unsettle markets.

Keir Starmer announced his resignation as Prime Minister, paving the way for Andy

Burnham to take over at No. 10. UK equities were largely unfazed, while the pound and government borrowing costs steadied.

The Bank of England left interest rates unchanged at 3.75% after inflation remained at 2.8% in May. Despite concerns that the Iran war would push inflation higher, the Bank lowered its inflation forecast, expecting it to rise to just over 3.25% later this year. Consumer spending rebounded in May and there are signs that confidence is

improving, although pressures remain.

The UK’s labour market remains relatively stable. Unemployment edged down to 4.9% in the three months to April, although job vacancies fell to a five-year low of 707,000.

Europe grapples with weaker growth. The European Central

Bank (ECB) raised interest rates for the first time since 2023 in response to higher inflation, increasing its main deposit rate from 2% to 2.25%. Markets expect two further rate increases by next spring.

Eurozone inflation rose to 3.2% in May from 3% the previous month, raising concerns that manufacturers may need to pass higher costs on to consumers. The economy unexpectedly contracted by 0.2% in the first quarter, weighed down by weaker output in Ireland and France.

China’s economy also showed signs of slowing after a strong start to the year. Retail sales fell 0.6% in May, the first decline in more than three years, while fixed asset investment dropped 4.1% in the first five months of the year. Industrial output growth also slowed, while domestic demand and the property market remained weak despite

continued strength in exports.

Investors favour broader markets
Cumulative return of major stock markets in June (%).

Market-moving events

Rotation from tech.

The Nasdaq fell by as much as 7% from its record high during the month as investors rotated into small caps, industrials, healthcare and financials. It recovered much of those losses as investors refocused on the beneficiaries of AI investment. The Magnificent 7 technology stocks underperformed as investors’ appetite for mega-cap stocks weakened.

Strong IPO debut.

SpaceX shares soared 19% on their first day of trading and climbed a further

20% on the second. However, after briefly rising above US$200 (from an IPO price of US$135), the shares retraced sharply, wiping more than US$600bn from the company’s market value. Despite this, the stock finished the month up 27%, with demand remaining strong.

Fragile ceasefire.

A lasting peace agreement between the US and Iran remains elusive. Although the two nations signed an interim peace agreement during the month, both launched further

attacks towards month end, reigniting tensions. However, both sides subsequently agreed to a ceasefire before negotiations resumed.

Investment highlights

No portfolio changes. There were no trades conducted during June. We expect to trade and rebalance the Agility portfolios during the week commencing 6 July.

TAA adds value. Tactical Asset Allocation (TAA) was a positive driver of returns. Relative value opportunities within equity markets were the main contributor to performance. Overweight positions in US small caps and US healthcare added value as technology-concentrated large caps came under pressure. Within fixed income, long-dated US Treasuries (bonds) also contributed positively, while weakness in the Japanese yen detracted from returns.

Cautious positioning. The portfolios remain cautiously positioned. We continue to be

underweight US large caps due to concerns over stretched valuations and excessive market concentration. The portfolios also maintain an overweight position in fixed income, reflecting its attractive yields and more favourable risk-return profile.

This update reflects Omnis and our investment management firms’ views at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance.

July 2026 Market Update - Europe and Japan lead market gains

Investor confidence returns.

Political uncertainty fails to unsettle markets.

Europe grapples with weaker growth. The European Central